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We surveyed 89 architecture firms to better understand the architecture statistics and trends in 2021 and help identify which strategies separate the best-managed firms from the rest.
Specifically, we looked at 5 main focus areas that have shaped Practice Operations:
- COVID-19: The ongoing impact of the pandemic on projects and remote work policies.
- Performance: The overall performance of firms based on their goals and KPIs.
- Productivity: The processes and tools that can help firms increase productivity.
- Profitability: The overall profitability of firms based on budgets, schedules, and fees.
- People: The overall employee turnover rate and positions firms are hiring for.
Top Insights from the 2021 Report
- The pandemic is still causing some project delays, but most high-performing firms are not affected.
- More firms (76.6%) are implementing hybrid work mode going into 2022, and full remote work have dropped significantly from last year.
- The top KPIs that architecture firms measure for success are client satisfaction, cash flow and P/E ratio.
- 90% of architecture firms said their operations fall on the shoulder of Principals/Executive teams.
- Most firms want to modernize their financial planning process, followed by task management, and project management.
- Project management becomes one of the top concerns for architects, besides design, across areas like technology, processes, and hiring.
- Alarmly, most firms aren’t sure or don’t track if their projects are on time or on budget.
- Firms are optimistic about increasing fees - 3 out of 4 firms surveyed this year are planning to increase their fees in 2022.
- The industry might not be too significantly impacted by the Great Resignation with the employee turnover rate remaining roughly flat for almost 45% of firms.
- Hiring is on the rise dramatically across architecture firms from 52% last year to 84% this year.
Architecture teams are under tremendous pressure, even before the pandemic started.
In fact, 96.9% of architects said they’ve experienced burnout in 2021.
But there’s encouraging data that shows a focus on better processes can result in positive outcomes and lower burnout.
When we look at the firms who say they’re “exceeding goals”, or “meeting all goals” (high-performing firms), they also have a tendency to keep track of project progress and invest in project management software.
We found that:
- Firms that are able to deliver their projects on budget (17%) and on time (26%) are more likely to meet or exceed their goals for the year.
- 40% of firms that meet or exceed their goals plan to invest in project management software next year, right behind design software at 49%.
- Financial planning (54%), project management (46%), and task management (46%) are the top 3 processes that high-performing firms want to modernize with the use of technology.
- Most high-performing firms haven’t been impacted by the Great Resignation with 51% of firms reporting that their employee turnover rate stayed roughly flat.
- 63% of high-performing firms consider client satisfaction to be the most important KPI for measuring success.
Focuses on the areas mentioned above create a positive growth loop for architecture firms.
For example, high-performing firms that invest in project management software are more likely to deliver projects on time and on budget.
Those same firms are also more likely to focus on client satisfaction, want to modernize their financial planning, have less employee turnover, and so on.
As we found out in the State of Burnout in Architecture Report - inefficient workflows/processes are a major cause of burnout in our industry.
When you invest in the right tools for your teams, they’re more likely to deliver quality design solutions while being on budget and on time, without feeling overwhelmed or overworked.
The Pandemic is Still Causing Some Project Delays
Last year, more than 90% of firms surveyed by PSMJ Resources said that they’ve experienced some project delays and cancellations.
However, as the world slowly adapted to the “new normal” so did the architecture industry.
From our survey:
43.2% of the firms said that their existing projects weren’t affected by the pandemic.
Another 43.2% of respondents answered that their firms have had paused or delayed some of their projects due to COVID-19 in 2021.
It seems that this year the pandemic had a less significant impact on the industry compared to 2020.
It’s important to note: 57% of high-performing firms that are meeting or exceeding their goals are reporting no change in the pandemic impact on their project.
As these firms are the same ones that do a better job at keeping track of their budgets and schedules, you can probably guess the key takeaway here:
Firms that are generally more organized tackle any upcoming challenges more efficiently.
More Firms Are Implementing Hybrid Work Mode
One of the most impactful changes that the pandemic brought to the architecture industry is incorporating remote work into our culture.
Architecture firms were faced with logistical challenges to get their entire team on the cloud to work from home.
Today, more firms are re-opening their offices and moving to a hybrid work model.
Compared to last year when only 39.1% of firms planned to incorporate hybrid work, a substantial 76.6% of firms will be choosing this route in 2022.
The numbers of firms that are operating fully remote dropped significantly from 34.8% last year to only 9.9% this year.
More firms are also embracing flexibility in the implementation of their remote work policy.
In our survey, more than a third of respondents are letting their employees decide whether to work from the office or work remotely.
With only 21% of firms intending to work fully in office, hybrid work will be the norm in our industry moving forward.
Firms need to focus on creating a successful hybrid workplace that fosters:
The most important step here is to improve the communication and collaboration between in-office and remote workers so that all of them can work productively.
Evelyn Lee, FAIA, says that a hybrid practice is actually the hardest practice.
Most firms make the mistake of only talking about how many days you're going to be in person in the office versus working remotely.
But the main attention should be on the operational policies and updates in order to work well in a hybrid world.
“We're missing out on 95% of the conversation we need to be having around what does that mean to the changes and operations processes and policies that we have around people, and how we work and how we do and execute work.”
- Evelyn Lee, FAIA, Slack, and Practice of Architecture
Top 3 KPIs: Client Satisfaction, Cash Flow and P/E Ratio
Key Performance Indicators (KPIs) are metrics that help firms track and improve their overall financial health.
KPIs aren’t just numbers that somehow manage to find their place in your annual reports.
On the contrary, they can help firms understand and improve their overall performance and ensure profitability.
KPIs will tell you whether your firm is headed in the right direction and what adjustments need to be made in order to achieve your strategic goals.
As a service-based business, client relationships are always top of mind for architects.
So it’s not surprising that the top KPI for architects is Client Satisfaction at 56.8%.
However, even though architects rank client satisfaction as the most important metric, most find it difficult to provide a consistent client experience across teams (AIA Tech Culture Report 2021.)
Client experience starts at the client onboarding process, which very few architects implement in their firms (only 13% according to our poll.)
To provide an excellent client experience, Jacob Reidel, Senior Director at Saltmine & Assistant, suggested that there should be a place for customer success in an architecture practice.
What is Customer Success?
Customer success, in the tech world, is a team that works with customers directly to make sure they’re getting the support and advice they needed to succeed when using your product or services.
“We created something like client solutions because we were looking to see how could you create a model that can bring subject matter experts to the table who can also manage client relationships, but they can scale. And the partner-principle model can't scale to the degree that we were scaling at WeWork.”
- Jacob Reidel, Senior Director at Saltmine & Assistant
Operations Largely Fall on the Shoulders of Principals/Executive Team
Our latest architecture statistics survey confirms that it’s a common practice, especially for smaller firms, to have the principals or the executive team take care of the firm operations.
With everything already falling on their plate, Principals or executive teams are responsible for managing the operations at almost 90% of the surveyed firms.
Meanwhile, only 15.3 % of surveyed firms have a dedicated operations team/person.
Operations can be time-consuming which is why we believe that having a dedicated operational team or person can be beneficial for any firm.
The AIA defines a Chief Operating Officer and a Director of Operations as follows:
Having a dedicated operational team can help your firm:
- Optimize day-to-day processes to improve efficiency across project teams
- Develop quality and production standards to deliver the project
- Monitor and plan revenue growth
This way, the principals will be able to shift their focus on business development and client relationships, while the firm’s workflow runs smoothly.
For example, at Rossmann Architecture, the firm created a Director of Operations position whose sole job is to:
- Streamline operations
- Manage the office
- Provide back-office support to architects.
These efforts have allowed the firm to scale much faster than it could in the past.
In fact, they’ve 3x their revenue since they restructured their operations. Part of the re-structuring also included implementing Monograph as their practice operations software.
“We use the data inside Monograph to make important decisions on how to manage our project and our staff, which is making us more efficient, more profitable and in turn hire more people.”
- Pierre Proulx, Team Lead - Architecture, Rossmann Architecture
66% of Architecture Firms Want to Modernize Financial Planning
In the past 2 years, the architecture industry was introduced to a variety of tools that were originally intended to ease the transition to remote working.
And after the pandemic, it became more than clear that a lot of operational processes in architecture firms need to be and can be modernized.
According to our survey respondents, financial planning (65.9%) is the No. 1 process that needs to be modernized.
More and more firms are also concerned about their workflows and processes with task management (60%) and project management (58.8%) as their other top concerns.
When it comes to financial planning and profitability, it’s essential for firms to get a grasp of financial management to make data-driven decisions.
Rena Klein, FAIA, explains financial management as a way to see the big picture of how your firm is doing so that you can make business decisions and plan for the future.
“Financial management involves project accounting in our firms, as well as looking at the whole big picture. And it gives you insight into how to make smart business decisions.”
- Rena Klein, FAIA, Partner at Charrette Venture Group
One way to get your financial management in order is by using a reporting tool like Monograph, which collects all the data you input and gives you visualized report on:
- Planned profit
- Profit drivers
- Forecasted revenue
So you can make the right financial decisions for your firm monthly, quarterly and annually.
Project Management Became One of the Top Concerns for Architects
The design will always be the main concern for architects, as that’s what we do.
However, we discovered an interesting trend where project management consistently shows up as one of the top areas of concern in our data.
For example, we found that:
- 61.6% of firms would like to hire someone with project management experience next year - ranking 2nd after design experience.
- 58.8% believe that project management processes need to be modernized - ranking 3rd after financial planning and task management.
- 56.2% of firms plan on investing in project management platforms - ranking 2nd after design software.
There’s a reason why the industry has largely shifted its focus on project management.
It’s no secret that a lot of firms have struggled with inefficient time management and endless deadlines which often results in employee burnout.
In our State of Burnout in Architecture report, lack of efficient workflow and processes were listed as some of the largest causes of burnout in the industry.
Improving your project management processes has both a positive effect on your employee performance and a great impact on your profitability.
To overcome your project management weaknesses, Rena recommends starting with tracking your hours. Then you can move on to tracking your key operational indicators.
“We suggest perhaps a more sophisticated way, like using a product like Monograph as a project management tool that can really help you understand where your hours are going and how the performance of your firm is tracking.”
- Rena Klein, FAIA, Partner at Charrette Venture Group
Monograph makes time tracking easy so your project teams will actually start tracking their time. It also helps integrate your team into the bigger picture.
In fact, Workshop ADP uses the time tracking feature inside Monograph to help their employees understand how their used and remaining time fits into the overall project budget and scope.
Most Firms Don’t Keep Track of Projects
We already know that high-performing firms are more likely to deliver projects on time and on budget.
However, it was surprising to see that most firms in our survey aren’t sure or don’t track whether they are:
- On or ahead of schedule (18%) or
- On or under budget (16.9%)
We also found an interesting correlation that between project management process and project delivery.
Firms that think their project management process need to be modernized are more likely to not track their project progress.
It’s becoming obvious that keeping track of project progress can impact whether or not firms deliver their projects on time and on budget, which in turn affects your client satisfaction.
To make sure your completion of projects are within budget and schedule, you need to:
1 - Have a clear view of your fees and hours so you won’t run out of fee
For example, AMBL Studios uses the MoneyGantt within Monograph to look at:
- How much is owed to them (fees)
- How much time they have billed per project per phase (hours)
So they can make sure they’re not going over budget.
2 - Plan your staffing efficiently to stay within your budget
Using tools like Monograph can make your resource planning faster and more accurate.
There are multiple ways to use the data Monograph provides to streamline your staffing process.
“With Monograph, one of the tools is a great resource planning tool, and this can basically be done three ways. You can actually run this by actual contracts and budgeted hours. You can do it by last week's timesheets from everybody. Or, as we almost always do it, we do it by a budget of required hours.”
- Tom Jacobs, Partner at Krueck + Sexton Architects
Firms are Optimistic About Increasing Fees
Last year, a majority (43.5%) of survey participants were hesitant about increasing their fees due to the uncertainty of the pandemic.
With the economy coming back strong and surpassing pre-pandemic levels (CNBC), firms are much more optimistic about increasing their fees next year.
In fact, a substantial 74.6% of firms are considering increasing their fees in 2022.
Here is the breakdown of the percentage of fee increase that firms are planning:
- 1-5% (32.2%)
- 5-10% (25.3%)
- More than 10% (17.1%)
Increasing your fees can have an impact on your firm’s overall financial health.
So make sure to take everything from costs to profit into consideration if you plan on re-adjusting your fees.
This way, you’ll know whether you’re making the right decision for your firm in the long run.
The Great Resignation Has a Slight Impact on Architecture Firms
A record 4.4 million Americans left their jobs in September 2021, accelerating a trend that has become known as the Great Resignation.
Most of the architecture firms we surveyed, however, haven’t been impacted much by the Great Resignation.
44.7% of firms said their employee turnover stayed roughly flat and only 16.5% of firms employee turnover was significantly higher than usual.
More importantly, around 51% of high-performing firms responded that their turnover rate remained flat.
This report shows us that high-performing firms are better at retaining their employees.
And what we discovered so far is that these firms are also more likely to:
- Track their budgets and schedules
- Modernize their operations
- Invest in technology solutions
All of this leads to more effective processes and more efficient workflows and as a result - less burnout.
These all require a culture of change from the ground up within your firm.
Libo Li, Chief Technology Officer at KatalystDI, explained that when a company doesn’t embrace adaptability, there are consequences and one of those is employee turnover.
“If you have a lot of churns, what this means is that adaptive individuals are adapting themselves out of slowly adapting organizations. As with any organization, it really has to start foundationally with culture.”
- Libo Li, Chief Technology Officer at KatalystDI
Hiring is on the Rise Dramatically in 2022
The number of firms that are planning to hire has risen dramatically from 52% last year to 84% this year.
But due to high demand in talent acquisition, firms are having difficulties hiring talents.
According to a poll inside the Women Architects Collective, 96% out of the 88 firms that responded said that they’re having trouble hiring.
“I work with Architectural firms nationwide & most are having difficulty hiring right now. The market is super tight. There’s a lot of reshuffling due to the Great Resignation & now because of vaccine mandates. Architects I work with end up with 3-5 offers.”
- Bryce Batts, Recruiter at Futures Consulting
Among all the firms that are hiring, design experience continues to be the top skill that employers are looking for.
In fact, 69.8% of firms are looking for design experience, compared to 34.8% last year.
Project management rises up as the 2nd most look-after skill for architecture firms with 61% of firms looking for such experience, compared to only 4.3% last year.
34.9% of surveyed firms also want to hire for marketing/business development, compared to 13% last year.
If you’re looking for a career change, right now might be a good time to do so. With hiring on the rise, candidates have a lot more options to choose from.
Consider going into project management, which, as we know, is now more important than ever in architecture firms with our ever-changing work environment.
Flora Bao, Project Manager at BIG, explained that if she was hiring a PM to do her job, she would look for the soft skills required to work with a team of people such as:
- Being compassionate to relate to different people
- Being strong when needed to put your foot down
- Being agile and transparent so information doesn’t end at you
“I would look for somebody who is compassionate, actually, because you need to be on everybody's side. You are not the decision-maker. You are the person in the middle, so you need to be able to be level-headed enough to encounter all different personalities.”
- Flora Boa, Project Manager at BIG
After almost 2 years of battling with the challenges that the pandemic brought into the industry, it’s clear that some changes are here to stay.
Hybrid work isn’t going anywhere and it’s up to firms to find the best way to incorporate it into their culture.
Despite the presented challenges, about 39% of firms have managed to either exceed or meet all of their goals.
But this is by no means a coincidence, as these firms are also the ones that focus on project management, financial planning, client satisfaction, and so on.
In our earlier findings, firms that need their project management process modernized are also more likely to not track their project progress.
These aren’t really new secrets to architects. We all know that proper planning and workflows can create a positive growth loop that makes firms more successful.
But only a few actually implement the tools available to us to adapt to change.
For architecture firms that are eager to grow and retain talent, there’s no better time than now to invest in your team.
The Best Practice Report examines the perspectives of practicing architects from a wide range of positions. From November 12 to December 15, 2021, we invited design professionals to complete a survey that explored topics ranging from COVID-19 impact, profitability to hiring in 2021. We also asked them to assess if they were meeting their goals.
We received 89 responses from respondents across all firm sizes. After the survey was closed, results were analyzed and compared to last year’s Architecture Statistics and Trends Report. From there, our team identified key trends across common areas of focus within Practice Operations like performance, productivity, profitability, and people.